The Case Background
The complainant filed a claim with Suncorp on October 8, 2021, for repairs valued at $74,690. She alleged that an earthquake had caused damage to her property, which was covered under her home and contents policy. Suncorp declined the claim, arguing that the homeowner had not established that the damage was caused by a "single earthquake or accident."
AFCA, however, found that the onus was on the insurer to prove why the claim was excluded from coverage. The insurer claimed that its experts had determined that the damage was caused by seasonal ground movements, which were excluded under the insurance policy.
The Experts' Reports & AFCA's Analysis
While a Suncorp-appointed builder suggested that the cracks were inconsistent with earthquake damage, they recommended further inspections to determine the actual cause of the damage.
After six months, Suncorp finally engaged an engineer, who completed a visual inspection of the property and noted that it was improbable for the earthquake, which hit Victoria, to have caused the damage. Instead, the engineer attributed the damage to rainfall and seasonal earth movement, which caused shrinkage and movement.
In contrast, a complainant-appointed expert believed that the damage was caused by the earthquake and noted that a floor-level survey revealed significant damage to the building's stumps and subfloor movement. AFCA disputed the insurer's expert and noted that their analysis of soil reaction to moisture had been "generic in nature."
The Lessons Learned for Insurers
This case highlights the importance of insurers to prove why exclusions in their policy apply to a particular claim. The burden of proof is on the insurer to show that the cause of damage was indeed not covered and not the other way around. As seen in this case, the insurer's expert report was deemed unclear and unconvincing.
Insurers should also ensure that their claims handling process is transparent and unbiased. The insurer's claims contact file, which suggested that an engineer's report had been made "merely to affirm the denial," raised doubts about the insurer's motives for requesting such a report.
This case also highlights the importance of agility in claims handling. Delayed claims handling resulted in the insurer bearing additional costs incurred by the homeowner due to prolonged inconveniences.
Conclusion
To avoid cases like this, insurers need to have a robust process for handling claims, which includes a transparent and unbiased approach, timely inspection by experts, and a rigorous assessment of the cause of damage. It's the insurer's responsibility to establish why exclusions apply to a particular claim and to provide clear and convincing evidence to dispute the claim.
